The 2021 Plan Amendment increases the number of shares of Class A Common Stock reserved for issuance under the 2021 Plan by an additional 13,000,000 shares. Additionally, the 2021 Plan Amendment increases the automatic share increase provision in the event that the aggregate number of shares of Class A Common Stock that are available for issuance under the plan as of the last day of a fiscal year (commencing with the last day of the 2023 fiscal year) is less than five percent (5%) of the company capitalization (as of such date) (the “Automatic Trigger”), then on the first day of each fiscal year of the Company commencing with the fiscal year beginning on January 1, 2024 and continuing for each fiscal year thereafter for the duration of the plan (ending on and including the fiscal year commencing on January 1, 2031), the aggregate number of shares of Class A Common Stock that may be issued under the plan will automatically increase in an amount equal to the lesser of (i) five percent (5%) of the company capitalization on the last day of the immediately preceding fiscal year or (ii) such number of shares of Class A Common Stock as may be determined by the Board prior to the date of the automatic increase. Notwithstanding the foregoing, the 2021 Plan Amendment provides that in the event that the aggregate number of shares of Class A Common Stock that are available for issuance under the plan as of the last day of any such fiscal year is equal to or greater than five percent (5%) of the company capitalization (as of such date) and, as a result, the aggregate number of shares of Class A Common Stock available for issuance under the plan does not increase as of the first day of the following fiscal year in accordance with the Automatic Trigger, the Board retains the authority in its sole discretion to, prior to the date that such automatic increase would have occurred had the Automatic Trigger been attained, increase the aggregate number of shares of Class A Common Stock that may be issued under the plan in any such fiscal year (commencing with the fiscal year beginning on January 1, 2024 and continuing for each fiscal year thereafter for the duration of the plan (ending on and including the fiscal year commencing on January 1, 2031)) by up to five percent (5%) of the company capitalization on the last day of the immediately preceding fiscal year as if the Automatic Trigger had been attained in accordance with its terms.
The above description of the 2021 Plan Amendment is qualified in its entirety by reference to the text of the 2021 Plan Amendment, which is attached hereto as Exhibit 10.1, and incorporated herein by reference.
CEO Compensation
As previously disclosed, on November 10, 2022, the Board appointed Cheng Lu as Chief Executive Officer of the Company. On December 13, 2022, in connection with Mr. Lu’s appointment, the Compensation Committee approved, and on December 14, 2022 the Company and Mr. Lu entered into, a letter agreement (the “Letter Agreement”) and a severance and change in control agreement (the “Severance Agreement”).
The Letter Agreement provides that Mr. Lu will receive an annual base salary of $450,000, a target annual bonus opportunity of 80% of his annual base salary, which is guaranteed to be at least equal to $400,000 for the fiscal year ending December 31, 2022, and a monthly housing allowance of $9,000. The Letter Agreement further provides for an award of 6,850,000 stock units, 50% of which will be granted in the form of time-based restricted stock units that will be eligible to vest over a period of four years following the date of grant and 50% of which will be granted in the form of performance-based restricted stock units that will be eligible to vest based on the attainment of certain stock price hurdles, in either case, subject to continued employment and in exchange for the cancellation and forfeiture of each of Mr. Lu’s 1,850,000 outstanding time-vested stock options, and taken into account the 1,150,000 performance-based options that were forfeited when Mr. Lu resigned as Chief Executive Officer in March 2022. The Letter Agreement also provides for a cash payment of $150,000, which represents the balance of the consulting fees that Mr. Lu would have received under his consulting agreement had that agreement continued in accordance with its terms.
The Severance Agreement provides for the following severance entitlements upon a termination of employment by the Company without cause or by Mr. Lu for good reason, in either case, other than within six (6) months prior to or within twelve (12) months following a change in control: (i) twelve (12) months of base salary continuation; (ii) subsidized COBRA coverage for up to eighteen (18) months; (iii) a lump-sum cash amount equal to $15,000,000 payable within thirty (30) days of such termination of employment by the Company without cause or by Mr. Lu for good reason, provided that such termination occurs prior to the third anniversary of the effective date of the Letter Agreement; and (iv) an additional eighteen (18) months vesting of then-outstanding equity awards, with performance goals and other vesting criteria to be deemed satisfied in accordance with the terms of the applicable award agreement and the stock price hurdles applicable to his initial performance-based restricted stock units deemed achieved. The Severance Agreement further provides for the following severance entitlements upon a termination of employment by the Company without cause or by Mr. Lu for good reason, in either case, within six (6) months prior to or within twelve (12) months following a change in control: (i) a lump-sum cash payment equal to two times the sum of his base salary and annual target bonus; (ii) subsidized COBRA coverage for up to eighteen (18) months; and (iii) accelerated vesting of each then-outstanding equity award, with performance goals or other vesting criteria deemed
